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Record-High Cuts to S&P 500 EPS Estimates for Q2 for 1st Month of a Quarter

Earnings

By John Butters  |  May 6, 2020

During the month of April, analysts lowered earnings estimates for companies in the S&P 500 for the second quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for all the companies in the index) declined by 28.4% (to $26.46 from $36.94) during this period. How significant is a 28.4% decline in the bottom-up EPS estimate during the first month of a quarter? How does this decrease compare to recent quarters?

During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.4%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.5%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.9%. Thus, the decline in the bottom-up EPS estimate recorded during the first month of the second quarter was larger than the five-year average, the 10-year average, and the 15-year average.

Change in S&P 500 Quarter EPS 1st month of quarter

In fact, this marked the largest decline in the quarterly EPS estimate over the first month of a quarter since FactSet began tracking this data in Q1 2002. The previous record was -20.6%, which occurred in the first month of Q1 2009.

At the sector level, all 11 sectors recorded a decline in their bottom-up EPS estimate during the first month of the quarter, led by the Energy (-471.9%), Consumer Discretionary (-78.8%), and Industrials (-61.9%) sectors. Overall, 10 sectors recorded a larger decrease in their bottom-up EPS estimate relative to their five-year average, 10-year average, and 15-year average. The Real Estate sector does not have five years of historical data available yet.

Sector Quarterly EPS Revisions: First Month of Quarter (Source: FactSet)

Sector

Q220

5-Year Avg.

10-Year Avg.

15-Year Avg.

Energy

-471.9%

-6.4%

-4.8%

-3.5%

Consumer Discretionary

-78.8%

-2.1%

-1.7%

-2.6%

Industrials

-61.9%

-3.7%

-2.5%

-2.5%

Financials

-38.1%

-0.4%

-0.3%

-2.9%

S&P 500

-28.4%

-1.4%

-1.5%

-1.9%

Communication Services

-25.5%

1.8%

0.6%

0.0%

Materials

-22.1%

-5.2%

-6.2%

-6.8%

Health Care

-15.2%

-0.4%

-0.6%

-0.7%

Consumer Staples

-11.4%

-1.3%

-1.3%

-1.0%

Information Technology

-9.5%

-1.5%

-1.6%

-1.8%

Real Estate

-9.3%

N/A

N/A

N/A

Utilities

-2.2%

-0.8%

-0.7%

-0.7%

In fact, seven of the 11 sectors recorded the largest decline in their quarterly EPS estimate over the first month of a quarter since FactSet began tracking this data in Q1 2002: Energy, Consumer Discretionary, Industrials, Communications Services, Health Care, Consumer Staples, and Real Estate.

As the bottom-up EPS estimate for the index declined during the first month of the quarter, the value of the S&P 500 increased during this same period. From March 31 through April 30, the value of the index increased by 12.7% (to 2912.43 from 2584.59). The second quarter marked the 16th time in the past 20 quarters in which the bottom-up EPS estimate decreased during the first month of the quarter while the value of the index increased over this same period.

S&P 500 Change in Q220 EPS vs change in price

 

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John Butters

Vice President, Senior Earnings Analyst, Investor Relations

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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